Click of loan moratorium in Malaysia / Fauziah Mohamad Yunus and Anita Abu Hassan

The COVID-19 pandemic has brought over severe health and economic crisis. According to the World Health Organisation (WHO), this illness will affect the lower respiratory tract that include windpipe and lungs, as well as the upper respiratory tract involving sinuses, nose, and throat. Fever, coughing, and shortness of breath are a few of the warning signs and symptoms of COVID-19. Infection can lead to pneumonia, severe acute respiratory syndrome, and, in the worst case, death. Lockdowns have been implemented in numerous nations, including Malaysia as the best alternative to stop the spread of this deathly virus. Both the financial condition of the businesses and the individual bank borrowers had been affected by this lockdown measure. Many Malaysians are losing their jobs, going on unpaid leave, or having their salaries deducted, and many small and medium enterprises are going out of business. In easing the financial burden of the Malaysian, starting in April 2020, Bank Negara Malaysia has announced a six-month automatic moratorium on all bank loans to help borrowers who suffer temporary financial difficulties. Malaysia, according to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, is the only government that has automatically extended a loan moratorium to all debtors. Individual and business borrowers can benefit from the deferment package to postpone loan payments during the moratorium period. Except for credit card bills, the postponement includes conventional and Islamic financing repayment obligations such as housing loans and hire purchase loans. As such, no legal action will be taken against the borrowers and they are exempted from making monthly payments on hire purchase and home loans throughout the six months period beginning in April 2020. According to Mehta and Kaul (2020), moratoriums are not a new notion in the Indian banking sector, having been granted on multiple occasions previously. Debt or foreclosure moratoriums have also been implemented in nations such as the United State of America, Canada, Greece, Italy, the United Kingdom, Singapore, Thailand, Indonesia, and the Philippines (Bedi & Tan, 2020). Meanwhile, after the 2008 housing crisis, Japan offered a moratorium for SMEs, but the repercussions of the protracted moratorium period were mostly unfavourable, and the scheme giving the moratorium was widely regarded as a failure. The idea of a moratorium continues to be unclear to many individuals. The loan moratorium just delays payments at which it does not waive the borrower's obligation to pay interest to the bank. The benefits of a moratorium are obtained when it allows borrowers to plan their repayment strategy without stress, and the moratorium period does not affect an individual’s ability to borrow, as it has no negative effects on the borrower’s credit score. Unfortunately, the moratorium will give some difficulties to the borrowers, as they will be charged accumulated interest on deferred payments, which includes any outstanding principal and interest. The implementation of loan moratorium automatically leads to a longer loan tenures. To be clear, this is only a delayed payment instalment by customers to banks without any charges.